How to avoid this year's common tax scams

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• If tax advice on social media sounds too good to be true or claims universal applicability, treat it only as a starting point requiring verification from primary sources like IRS.gov.  Copied to clipboard!
• Legitimate tax advice is grounded in law (Internal Revenue Code, regulations, case law) and will discuss risks like audit exposure, unlike bad advice which often skips these details.  Copied to clipboard!
• Be vigilant against direct tax scams, including fraudulent IRS contact via text or threats, and ensure any paid tax preparer possesses a valid Preparer Tax Identification Number (PTIN) and signs the return.  Copied to clipboard!

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Identifying Bad Tax Advice

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• Key Takeaway: Real tax advice is grounded in law, unlike social media content that skips nuances and caveats.
• Summary: Tax law is technical and grounded in documentation like the Internal Revenue Code, regulations, and case studies. Bad advice often skips these details, jumping straight to results like guaranteeing qualification or claiming the IRS won’t check. Content that makes complex provisions sound universal likely applies only to a narrow set of taxpayers.

Examples of Tax Fraud

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• Key Takeaway: Inflating deductions and credits, such as claiming fake income for the Earned Income Credit or deducting personal vehicle use as 100% business expense, constitutes tax fraud.
• Summary: Common bad advice involves inflating deductions and credits, such as reporting fake income to qualify for the Earned Income Credit or claiming ineligible dependents for the Child Tax Credit. Business expenses must be ordinary, necessary, and properly allocated between business and personal use; personal use is not deductible. Relying on the idea that the IRS is understaffed and won’t catch errors is playing ‘IRS roulette,’ risking civil or criminal penalties.

Verifying Online Tax Information

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• Key Takeaway: Urgency is a scammer’s fuel; always verify online tax claims using primary sources like IRS publications.
• Summary: If online tax advice sounds interesting, consider it a starting point, as urgency is a scammer’s primary tool. Assume that if advice applies to everyone, it likely applies to almost no one, as tax law is highly fact-specific. Primary verification involves checking IRS.gov or using search engines to find specific IRS publication numbers to confirm substantial authority for any tax position taken.

Motivations Behind Misinformation

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• Key Takeaway: Misinformation is peddled for influencer income or as a direct tactic to steal information or money through fake retainer requests.
• Summary: Some social media peddlers seek clicks to build their livelihood as influencers, while others have hidden agendas like soliciting payment for non-legitimate services. This can escalate into traditional scams where individuals try to steal credit card information or demand retainers from non-legitimate preparers.

Identifying Direct Tax Scams

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• Key Takeaway: The IRS will not text threats or demand payment via gift cards; verify suspicious IRS contact through official IRS.gov channels.
• Summary: Tax resolution scams involve threatening phone calls insisting on immediate payment to avoid jail time, which is false, as the IRS does not use such tactics. Delete texts or emails claiming your refund is ready requiring identity verification, as these are phishing attempts to steal information. The IRS will only text with prior permission, and they never accept gift cards as payment.

Vetting Tax Preparers

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• Key Takeaway: A legitimate tax preparer must sign the return as a paid preparer, include their firm’s details, and possess a valid IRS Preparer Tax Identification Number (PTIN).
• Summary: A ‘ghost preparer’ is one who prepares a return but refuses to sign it, which is not optional for paid preparers. Preparers must have a valid PTIN, a number issued to authorized tax return signers. Before sharing sensitive data like Social Security numbers, verify the preparer’s credentials using the IRS public directory of credentialed tax preparers.

New Tax Deductions for the Year

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• Key Takeaway: Recent legislation expanded the State and Local Tax (SALT) deduction cap to $40,000 and introduced new deductions for overtime, tips, and age.
• Summary: The ‘One Big Beautiful Bill Act’ raised the SALT deduction cap for itemizers from $10,000 to $40,000, though income limits apply. New deductions available regardless of itemization include up to $12,500 for overtime pay and up to $25,000 for tips. Additionally, individuals aged 65 or older may be eligible for a $6,000 deduction.